Too Close for Comfort? The IRS Gives New Guidance on 501(c)(3)s and Working with Candidates

Although it appears that rules governing the political activities of 501(c)(4) organizations will be some time in coming, the IRS recently provided some new insights into how 501(c)(3) organizations can – and cannot – interact with the political world. In an adverse determination publicly released earlier this month, the IRS looked closely at how a 501(c)(3) organization can engage in educational activities, like conventions and conferences, that involve candidates who may identify with a particular political party.

In general, organizations recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code cannot engage in what is called “political campaign intervention.” This requirement is absolute: as a condition of getting (c)(3) status, organizations essentially cannot be too politically partisan in nature. For tax purposes, political campaign intervention includes any communications or activities that support or oppose one or more candidates for public office. This includes the more clear-cut activities, like running an ad opposing a candidate or making endorsements in a particular race. But it also can include other activities where the organization uses its resources to give one candidate an advantage over another.

In this determination, the IRS addressed one of these less obvious situations. Here, the organization applying for recognition as a 501(c)(3) told the IRS it planned to hold symposiums of “thinkers, statesmen and opinion leaders” as its primary activity. The organization anticipated that elected politicians, as well as candidates in the 2012 presidential race about to compete in a key primary, would be in attendance and would be speakers. An agenda for the symposium submitted by the organization to the IRS showed that all political speakers invited were affiliated with one particular party; it also included a “Meet the Candidates” event, for attendees paying an additional fee.

In planning its symposium, the organization also internally discussed using contacts within the political party to get speakers and to increase attendance, targeting county party groups for attendees, coordinating with local college and high school groups associated with the party for events, and keeping the state party chair up to date and involved in decisions.

The IRS concluded that the organization did not qualify for recognition of exempt status under 501(c)(3), focusing in particular on the ways in which the symposium exclusively favored one political party. Since the organization planned to invite only candidates from one party – and was apparently not able to demonstrate any nonpartisan reason for doing so – the IRS determined that the organization was involved in political campaign intervention, stating that “[w]hile inviting candidates to participate is not in itself campaign intervention, inviting only one particular party of candidates is.” Further, the organization did not help its case by showing how it planned to work closely with the party in organizing the symposium, leading the IRS to infer that the entire symposium really was intended to benefit the party and its candidates.

This determination presents one end of the spectrum for 501(c)(3) organizations that may want to invite candidates to speaking events. Many 501(c)(3) organizations hold conferences and conventions as a central educational activity, and many invite federal, state, and local current officeholders and candidates to speak. There are ways to conduct such activity without jeopardizing the organization’s exempt status:

No fundraising and no campaigning. Candidates speaking at an organization’s educational event should not be allowed to turn that opportunity into a venue for raising money for their campaigns. In addition, candidates should limit their remarks to the policy topics under discussion and not take the opportunity after speaking, for instance, to have their staff pass out campaign literature. This is an important guideline to follow for both tax and campaign finance law purposes.

If holding a forum or debate, invite all of the candidates and provide neutral ground. The IRS has previously approved of 501(c)(3) organizations holding forums where candidates are invited to participate if all candidates running against each other are invited, a broad range of policy issues are discussed, the moderator acts in a neutral way, and each candidate has equal time and opportunity to present his or her views. Organizations can also host separate debates for candidates within each political party – for instance, at least one court has found that a 501(c)(3) organization was not engaged in political campaign intervention where it hosted debates for candidates for the Democratic nomination for president and then separately a debate for candidates for the Republican nomination. In contrast to this recent ruling, that organization offered opportunities for both parties.

When organizing a forum or debate, keep planning independent of the party. One of the mistakes the organization in this recent determination made was planning its entire symposium with input from one political party. It developed strategies to work with the various arms of the party to drum up attendees and to find speakers, and that close connection likely gave the IRS pause about the degree to which the organization’s activities benefitted the party. Sometimes it may be necessary to work with a political party or with campaigns to get candidates to attend. But 501(c)(3) organizations should avoid letting any party or candidate dictate the format, tone, or structure of their forums, debates, or other educational activities, to avoid giving that party or candidate an advantage.